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Continued from page 2

Weidmann’s praise for the integrity of gold, and indictment of paper, is not presented as a whimsical metaphor. It is drawn from deep wells of German monetary scholarship:

The fact that Faust can indeed be interpreted in economic terms has been demonstrated, not least, by Professor Adolf Hüttl, who used to be Vice-President of the former Land Central Bank in Hesse. I am delighted that he is in attendance here today. Back in 1965, he wrote a very insightful article in the Bundesbank’s staff magazine about “Money in the Second Part of Goethe’s Faust”.

In the mid-1980s, while teaching in Sankt Gallen, Professor Hans Christoph Binswanger – who I am pleased to say is also here today – took a similar line and brought out a book entitled “Money and Magic: a Critique of the Modern Economy in the Light of Goethe’s Faust”.

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Indeed, the fact that central banks can create money out of thin air, so to speak, is something that many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish.

That both scholars whom he references attended this speech, and were acknowledged, gives a graceful reinforcement of Weidmann’s message. And, had he cared to do so, Weidmann also could have underscored his message with Ludwig Erhard’s Wirtschaftswunder — and its crucial currency reform.

Good money is not only a counsel of rectitude. It is critical path to restoring vibrant prosperity and social health. Erhard (as previously noted here) reprised the characterization of Pietrre and Rueff in his memoir Prosperity Through Competition. Germany’s economic miracle “began as the clocks struck on the day of currency reform. Only an eye-witness can give an account of the sudden effect which currency reform had on the size of stocks and the wealth of goods on display. Shops filled with goods from one day to the next; the factories began to work. On the eve of currency reform the Germans were aimlessly wandering about their towns in search of a few additional items of food. A day later they thought of nothing but producing them. One day apathy was mirrored in their faces while on the next a whole nation looked hopefully into the future.”

A counsel of “good money,” as gold is referred to by Deutsche Bank, is an essential part of the recipe for the revival for all, and especially Mediterranean, Europe. Rueff is a soulmate to Weidmann, his legacy a powerful authority for the Bundesbank’s opposition to the ECB’s easy money policies.

As recalled to this columnist by Rueff’s greatest living disciple, Lewis Lehrman (whose institute I professionally serve), Rueff, in his 1952 speech to the Committee for Action and Economic Expansion, reproduced in The Age of Inflation(Henry Regnery and Company, Chicago, 1964, pp. 62-64), also extols Goethe:

[I]t was Germany which gave the world its greatest money theorist—Goethe. He was, to be sure, no economist, yet it was he who in Faust (Part II) clearly demonstrated that inflation was and could only be an invention of the devil. … He then fully sets forth the theories of exchange media and fully employment. …But in his commentary on the festivities, the Herald foresees an unhappy outcome. … Nothing is missing: the technical formula, the political advantages, the social consequences. The poet was indubitably more clear-sighted than are most economists; he understood and clearly demon-started (sic, delightfully) that inflation was the work of the devil because it respected appearances but destroyed reality.

Green shoots of respect for the classical gold standard are beginning to pierce the decaying concrete of Neo-Keynesianism monetary theory all over the world. The gold standard’s purpose is by no means to privilege the wealthy and prejudice workers or debtors. The purpose of gold is to unwind the Faustian bargain throttling our economy and stifling job creation. The purpose of the gold standard is to propel the world economy into a new era of vibrant, widespread prosperity. And as Goethe, as if to cheer on future advocates of gold, wrote in in the concluding pages of Faust, Part II: Whoever strives, in his endeavour,/ We can rescue from the devil.